Old Age Security Benefit Rates Effective October 1, 2009

OTTAWA, ONTARIO--(Marketwire - Sept. 16, 2009) - Human Resources and Skills Development Canada today announced the quarterly benefit rates for Old Age Security (OAS) for the period covering October to December 2009.

As of October 1, 2009, the basic OAS pension, paid to people 65 years of age and over, will remain unchanged at $516.96 per month. Payments under the Guaranteed Income Supplement (GIS) and the Allowances will also remain unchanged.

OAS benefits are revised quarterly (in January, April, July and October) to reflect any increases in the cost of living as measured by the Consumer Price Index (CPI). Although there has been a decrease of 0.4 percent in the CPI compared with the last time the rates were adjusted, the October rates are not changing because the Old Age Security Act ensures that OAS benefits are not reduced in a period of deflation.

The OAS program consists of the basic pension, the GIS and the Allowances. The GIS and the Allowances provide additional benefits to eligible low-income pensioners and their spouses or common-law partners, as well as to eligible survivors.

Both OAS and the Canada Pension Plan enhance the quality of life of Canadian seniors by providing a modest base upon which to build additional income for retirement.

The OAS program is funded through general tax revenues and provides a basic minimum income for Canadian seniors. It provided 4.5 million seniors with $33.4 billion in 2008-2009.

The Canada Pension Plan (or the Quebec Pension Plan, in Quebec) is funded through contributions by Canadian workers, their employers and the self-employed, and through investment earnings on the Plan's funds. In addition to retirement benefits, the Plan provides disability benefits, death benefits, survivor benefits, and benefits for children.

Canada's public pensions are fully sustainable for generations to come. Canadians can count on their public pensions to be there for them in the future.

Old Age Security (OAS) rates are adjusted four times a year using a three-month moving average method. This is a statistical method used to reduce the effect of sharp changes in the Consumer Price Index (CPI). It allows for faster adjustment of OAS benefit rates to cost-of-living increases.

The rate increase is the percentage change between the average of the most recent three-month CPI period and that of the last three-month period in which OAS rates increased. If the cost of living has decreased over the most recent three-month CPI period, the calculation of the rate change will produce a negative amount. However, as prescribed under the Old Age Security Act, benefit rates do not decrease; they stay at the same level when there is a decrease in the cost of living. The highest three-month average CPI remains the reference level until the most recent average CPI climbs above that of the reference level.

As an example, the rate increase for the October to December 2009 period was calculated by comparing the average CPI for the May to July 2009 period to the average CPI for the May to July 2008 period, which is the last period in which OAS rates increased.

Since the change in average CPI for these periods was negative, the rates will remain the same as in the previous quarter. The following diagram shows how the CPI was used to calculate the OAS rates for this period: